Investing in this market is tough especially at a time when most of the companies are trading at multi-year lows and every stock looks cheap. Investors will be better off with those companies which have emerged winners in previous down cycles as well.
The term all-weather stocks are used to differentiate such companies that have weathered multiple economic and business cycles and delivered returns for investors across a long span, ICICIdirect said in a report.
“We believe in the current uncertain scenario when markets have implicitly thrown up once in a decade opportunity to construct long-term portfolios, investors should look at the consistent performers, going by historical evidence,” added the report.
There are 94 such companies in India that have helped investors build wealth across the past three decades. Over the past three decades, there have been only three instances of >40% correction at the index level.
At March 2020 lows, the Nifty has already corrected 40 percent from its all-time high. Although short-term volatility and uncertainty is normal after such correction, what transpires in the following years is a multi-fold bull phase.
Bottoms formed after such corrections have never been challenged again historically. Thus, from a technical analysis perspective, the current correction provides the requisite set-up for constructing long term portfolios, highlighted the report.
ICICIdirect mined data through four major bull phases viz 1988-1992, 1998-2000, 2003-2007, and 2009-2017, to identify the businesses, which have consistently delivered returns for the investors in each of the bull phases.
These are the companies with long listing history, proven track record, and weathered through different business/market cycles. Empirical evidence suggests that investing in these companies would be rewarding for investors.
There are 5 companies that have successfully emerged winners of the previous storm, and ICICIdirect is of the view that they can still give over 20 percent return in the next 1 year.
The 5 names are Ambuja Cements, Pfizer, Escorts, Blue Dart, and Tamilnadu Newsprint.
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